For gift cards or gift certificates exclusively for redemption for massage services, the sale for massage services is subject to sales and use tax at the time of purchase because the gift card or certificate grants the right to a taxable service. The sales and use tax on services is based upon where the customer receives the service or makes first use of the service. If the gift card or certificate is for a specific dollar amount eligible for redemption for various services or products, then the sales and use tax is imposed at the time of redemption based upon the types of services or products purchased with the card or certificate.
If a customer purchases the gift card or certificate designated exclusively for massage services and the purchase is at the business location of the massage service provider in Kentucky, then the transaction is sourced to Kentucky and is subject to Kentucky sales tax. If the customer purchases the gift card or certificate by phone or online and the gift card or certificate is designated exclusively for massage services delivered to a Kentucky address, the transaction is sourced to Kentucky and subject to Kentucky tax. If there is no physical delivery of the gift card or certificate, the transaction is sourced based upon the physical address of the customer or the billing address of the customer. See KRS 139.105 and KY Administrative Regulation 103 KAR 30:190 for additional sourcing guidance.